Access CPA Canada’s CAS 450, Evaluation of misstatements identified during the audit, to answer the following questions:
a. What are the three types of misstatements that can be identified by an auditor? What factors might suggest that the misstatement is not an isolated occurrence?
b. Refer to Auditing in Action 17-4. What type of misstatement is described in this vignette?
c. What factors should the auditor consider in determining whether uncorrected misstatements are material, either individually or in aggregate?
d. What documentation is required by CAS 450 in the auditors’ consideration of a misstatement?
e. Refer to Auditing in Action 17-4. What factors do you think the Auditor General was taking into consideration when determining that the misstatement was material?

Data from in Auditing Action 17-4

The audited consolidated financial statements of the Ontario  government are supposed to be tabled 180 days after the end  of the fiscal year. In 2016, however, the September 27 deadline  was missed because of a dispute between Auditor General of  Ontario Bonnie Lysyk and the government. The dispute related to the government’s choice to account for  pension plans that it co-sponsors by recognizing them as an asset  on its balance sheet. The Auditor General didn’t agree with the asset recognition and refused to issue an unqualified opinion. The  dollar impact of this dispute was $10.7 billion that would have to be added to the net provincial debt and accumulated deficit, and  an increase in the 2015–16 annual deficit of $1.5 billion.  With the provincial election scheduled to be held on or  before June 7, 2018, and the Ontario Liberal government promising  to balance the budget, there was pressure on the government  to eliminate the deficit. 

On October 3, 2016, without an audit opinion and nearly a  week past the legal deadline, the Ontario government released  its consolidated financial statements for the 2015–16 fiscal year.  The same day, Ontario’s Minister of Finance, Charles Sousa, came  out publicly and said that the government had only learned of  Ms. Lysyk’s problem with the government’s accounting methods  on September 13. He also insinuated that the Auditor General’s  office had leaked information to the Opposition party about the  dispute, and that any discussions between the Opposition and  the Auditor’s office would be unacceptable.  The Auditor General responded to Mr. Sousa saying that she  had been meeting with the government to discuss the pension  issue as recently as October 3, and the Liberals gave her no indication  that they were about to release the unaudited financial statements.  Lysyk added that her office had first told the government of  its concerns over the pension accounting in June, and further that  she had not told the Opposition anything about the matter.  The next day, the government agreed to change its accounting  for pension plans, and on October 5, the Auditor General  issued an opinion. The opinion was still qualified, however, as the  government refused to restate its prior year comparative period  consolidated financial statements, which constitutes a departure  from public sector accounting standards.  The public dispute between the Auditor General and the government  continued, as the next day the government formed an expert panel to deliver advice and recommendations as to the application of public sector accounting standards to Ontario’s pension assets. On February 13, 2017, the panel came back with a report that sided with the government’s initial accounting for the pension plans it co-sponsors, recognizing them as an asset on its balance sheet. The government accepted the panel’s recommendation and claimed that “Ontario remains on track to balance the budget by 2017–18 and remain balanced in 2018–19.”